Efficiency and cost effectiveness in private and public schools: Micro-financial expenditure analysis

Abstract

Private schools in the United States are caught in a financial paradox: They must attract parents through a quality program and keep costs at a reasonable level. To complicate matters still more, the rising cost of living has reduced the ability of many families to afford private school tuition.^ This dissertation studied three private, independent schools (one Catholic and two non-sectarian) located in metropolitan areas and compared them to 422 public schools in eight widely diverse school districts. The tuition to attend the private schools, in fiscal year 1991, ranged from $4,000 for the Catholic school to \$10,000 for the more expensive independent private school.^ This study used the Micro-Financial Cascade Model to track actual expenditures to the classroom in both private and public schools. Allocations and expenditures were sorted into 10 functions, including "Administration," "Building and Operational Support," "Teacher Development," "Pupil Support," and "Instructional Support" (these five functions are both at the school site and at the central office).^ The study found that the sample private schools were not more efficient in their allocations than the public schools they were compared to. In fact, the private schools put between 41% and 60% of their allocated funds into the classroom, while the public school districts put as much as 54% and 63% of their allocated funds into the classroom. The study also determined that the administrative costs of the private schools were higher than the public schools. On average, the private schools spent 18.57% on administration, while the public schools spent 11.55%.^ The differences in spending between the private and public schools can be attributed in some part to the mission of private schools. Critical to the ethos of the private school is maintaining small school and class size and addressing the unique talents of the individual student.^ The Micro-Financial Model seems to work well in both private and public schools, allowing intersectorial comparisons. As the study shows, the general belief that market-driven schools are ipso facto more efficient was not confirmed. In fact, private schools were found to be less efficient than the public schools they were compared to. ^